|
|
| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 34.86 | ACUITE A- | Negative | Reaffirmed | Stable to Negative | - |
| Total Outstanding | 34.86 | - | - |
|
Rating Rationale |
|
Acuité has reaffirmed its long-term rating of ‘ACUITE A-’ (read as ACUITE A minus) on the bank facilities of Rs.34.86 crore for Gold Star Diamond Private Limited (GDPL). The outlook has been revised from ‘Stable’ to ‘Negative’.
Rationale for the rating reaffirmation and revision in outlook The revision in outlook is driven by significant deterioration in the operating profit margins in FY2024E and FY2023. The operating profit margins declined to 3.11 percent in FY2024E as against 6.25 percent in FY2023 and 7.32 percent in FY2022. The group has further recorded a decline in the FY2023 revenues to Rs.1786.04 crore as against Rs.1865.39 crore in FY2022. This decline is on account of lower demand in the overseas markets. However, it is estimated to record a revenue of~ Rs.1965.44 Cr. in FY2024. The rating further, continues to derive strength from the healthy financial risk profile and adequate liquidity position of the group. The networth of group increased to Rs. 588.27 crores as on March 31, 2023, as against Rs. 516.54 crore as on March 31, 2022. The ratings remain constrained by the working capital-intensive operations and susceptibility to volatility in raw material prices. Going forward the ability of the group to improve the margins and maintain the adequate liquidity position and the healthy capital structure will remain key monitorable. |
| About Company |
|
Mumbai based, Gold Star Diamond Private Limited (GDPL), incorporated in 1995, is engaged in the cutting, polishing and trading of diamonds and is a part of the Gold Star Group of Companies. The revenue from GDPL constitutes around ~15-30 percent of Gold Star group led by Mr. Ankur Shah and Mr. Sayam Shah.
|
| About the Group |
|
The Gold Star group manufactures and exports diamond-studded gold and platinum jewellery. The group is also engaged in cutting and polishing of diamonds. The jewellery business is carried out through Gold Star Jewellery Private Limited (GJPL) (incorporated in 1990) and the diamond business is carried out through Gold Star Diamond Private Limited (GDPL) (incorporated in 1995). The jewellery division accounts for ~92 per cent of the group's revenue, and the diamond division for the balance ~8 per cent. The Group is managed by Shah family and are supported by seasoned professionals.
|
| Unsupported Rating |
|
Not Applicable
|
| Analytical Approach |
| Extent of Consolidation |
| •Full Consolidation |
| Rationale for Consolidation or Parent / Group / Govt. Support |
| Acuité has considered the consolidated business and financial risk profiles of Gold Star Press Release GOLD STAR DIAMOND PRIVATE LIMITED Rating Reaffirmed Jewellery Private Limited (GJPL) and Gold Star Diamond Private Limited (GDPL). Hereinafter refer to as ‘Gold Star Group’. The consolidation is due to the presence of common promoters, shared brand name, significant operational and financial synergies within the group.
|
| Key Rating Drivers |
| Strengths |
| Established track record of operations and experienced management
The Gold star group has established presence since 1990, in manufacturing and export of diamond-studded gold jewellery. The Group has established presence of over three decades in the industry and primarily exports to the USA and Europe. The long-term relations with some of the renowned wholesalers in the market has helped the group in getting regular flow of orders. Gold star group also deals with customers in Australia, Canada, and Italy to name a few. The directors extensive experience of over three decades in the gems and jewellery industry and long relationship with its customers has resulted in stable revenues. The Board is well supported by second line of experienced management team. The group reported turnover of Rs.1786.04 crore in FY2023 as against Rs.1865.39 crore in FY2022. The decline in the revenue is due to the rising inflation in the US markets, where majority of the customers of the company are based. The revenues of GSJ stood at Rs.1672.39 crore and that of GSD stood at Rs.329.38 crore for FY2023. The Group’s EBITDA margin declined and stood at 6.25 percent in FY2023 as against 7.32 percent in FY2022. The decline is due to the high diamond prices in FY2023. Further, group recorded turnover of Rs.1965.44 Cr in FY2024E with further estimated deterioration of EBITDA margin to 3.11 percent in FY2024E. The decline in operating margins due to a decrease in the gross margins and increase in administrative cost. The group has purchased an office building (adjacent to current office building) resulting in increase of administrative cost. Acuité believes that with its long track record of over two decades in the business and longstanding relationship with its customers, the group will continue to benefit from its established market position over the medium term. Healthy financial risk profile The group has a healthy financial risk profile marked by healthy networth, low gearing and comfortable debt protection metrics. The tangible net worth of the group increased to Rs. 588.27 crores as on March 31, 2023, as against Rs. 516.54 crore as on March 31, 2022. The increase is due to the accretion of profits to reserves. The group’s gearing stood at 0.76 times as on March 31, 2023, as against 0.73 times in the March 31, 2022. The total debt of Rs.447.34 crore as on March 31, 2023, consists of long-term borrowings of Rs.35.93 crore, unsecured loan of Rs.25.82 crore and short-term debt borrowings of Rs.371.74 crore. The interest coverage ratio stood at 3.98 times in FY2023 as against 5.39 times in the previous year 2022. The DSCR stood at 2.36 times in FY2023 as against 3.26 times in FY2022. Acuité believes that the financial risk profile of the company is likely to remain healthy in medium term on account of no debt funded capex in medium term. |
| Weaknesses |
| Working capital intensive nature of operations
The operations of GS Group are working capital intensive reflected by Gross Current Assets (GCA) of 212 days as on March 31, 2023, as against 201 days as on March 31, 2022. The inventory holding days stood at 80 days as on March 31, 2023, as against 69 days as on March 31, 2022. The average inventory holding period of the group is around 60 days. The inventory is stocked up on based on orders received. The debtor days stood at 121 days as on March 31, 2023, as against 128 days as on March 31, 2022. Average credit period allowed to the customers are around 145 days. The creditors days stood at 59 days as on March 31, 2023, as against 81 days as on March 31, 2022. Working capital requirement is funded through bank lines, the average utilisation of bank facilities is ~87.38 percent for 12 months ended as on March 2024 for GSJ and ~86.32 percent for 12 months ended as on March 2024 for GSD. Acuité believes the Group's ability to restrict further elongation in working capital cycle will be a key rating sensitivity. Susceptibility to volatility in raw material prices and foreign exchange fluctuation risk The Group is exposed to volatility in gold and diamond prices. The raw material is procured from the domestic market and overseas market. Hence the Group is exposed to raw material price fluctuation risk. Furthermore, the Gold Star Group derives most of its revenues from export sales. Hence, the profits are susceptible to fluctuations in forex rates. However, these risks are partially mitigated as the Group has export forwards as well as gold forwards with the banks. |
| Rating Sensitivities |
|
| Liquidity Position: Adequate |
|
The group’s liquidity profile is adequate marked by healthy net cash accruals against maturing debt obligations. The group generated cash accruals of Rs.80.83 crore in FY23 as against debt obligations of Rs.16.22 crore for the same period. The cash accruals of the company are estimated to remain in the range of around Rs.36.62 -56.91 crore during FY2024-25 against repayment obligations ranging from Rs.13.85 -12.33 crore for the same period. The group maintains unencumbered cash and bank balances of Rs.34.79 crore as on March 31, 2023. The current ratio stood at 1.82 times as on March 31, 2023. Acuité believes that group's liquidity position will remain adequate in the medium term.
|
| Outlook: Negative |
|
Acuité has revised the outlook on Gold Star group to 'Negative' outlook is driven by significant deterioration in the operating margins. The rating may be 'downgraded' if there is further deterioration in profitability margins. The outlook may be revised to 'Stable ' if company is able to improve its profitability while maintaining its working capital cycle and financial risk profile.
|
| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 23 (Actual) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 1786.04 | 1865.39 |
| PAT | Rs. Cr. | 70.72 | 85.14 |
| PAT Margin | (%) | 3.96 | 4.56 |
| Total Debt/Tangible Net Worth | Times | 0.76 | 0.73 |
| PBDIT/Interest | Times | 3.98 | 5.39 |
| Status of non-cooperation with previous CRA (if applicable) |
| Not applicable |
| Any Other Information |
| None |
| Applicable Criteria |
|
• Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm • Consolidation Of Companies: https://www.acuite.in/view-rating-criteria-60.htm • Default Recognition: https://www.acuite.in/view-rating-criteria-52.htm • Manufacturing Entities: https://www.acuite.in/view-rating-criteria-59.htm |
| Note on Complexity Levels of the Rated Instrument |
|
In order to inform the investors about complexity of instruments, Acuité has categorized such instruments in three levels: Simple, Complex and Highly Complex. Acuite’ s categorisation of the instruments across the three categories is based on factors like variability of the returns to the investors, uncertainty in cash flow patterns, number of counterparties and general understanding of the instrument by the market. It has to be understood that complexity is different from credit risk and even an instrument categorized as 'Simple' can carry high levels of risk. For more details, please refer Rating Criteria “Complexity Level Of Financial Instruments” on www.acuite.in.
|
|
| |
|
|
|||||||||||||||||||||||||||||||||||||||||||||
|
| |
| *Annexure 2 - List of Entities (applicable for Consolidation or Parent / Group / Govt. Support) | ||||||
|
||||||
|
Contacts |
|
|
|
About Acuité Ratings & Research |
